Company addresses factors influencing decision to idle Skyline

Skyline mine production will slow, then stop after the middle of next year. Arch Coal announced Tuesday that the mine will be idled, with operations halted in second quarter 2004. Canyon Fuel based the work stoppage decision on a weakness in the Utah coal market, according to company officials.

On Tuesday, Arch Coal announced that Canyon Fuel will idle Skyline mine by second quarter 2004.

The May 27 press release indicated the decision was due to a weak Utah coal market.

Skyline employs approximately 215 Carbon, Emery and Sanpete County residents. The mine produced about 3.5 million tons of coal last year.

"While we regret the need for this action, we support Canyon Fuel's decision to idle the Skyline mine," noted Steven Leer, Arch president and chief executive officer. "With production in the southern portion of the mine nearing an end, Canyon Fuel is faced with initiating expensive development work in a new reserve area to the north in order to keep the mine operational. Without a solid portfolio of base load contracts and evidence of an improving Utah coal market, we simply can not justify such an investment at this time."

Arch's corporate headquarters in St. Louis, Mo., confirmed that Skyline was being temporarily shut down for market reasons rather than due to the water problem at the underground coal production operation.

"We have been encountering water in the current reserve area, but we have been managing it," pointed out Deck Slone, Arch vice president of investor relations and public affairs.

"We often encounter water in deep mines like this so that is nothing new. But where we are presently mining toward the north, we have found very little water so that isn't really a factor in the decision," added the Arch Coal vice president.

One of Skyline's two continuous miners ceased operation earlier in the month. The second is expected to be idled during third quarter 2003

The longwall should finish mining the remaining panels in second quarter 2004 and the company will idle the underground operation.

Layoffs will occur at the mine near Scofield in phases, according to the Arch representatives. The specific timing has yet to be determined.

"We join Canyon Fuel in commending the Skyline workforce for operating in a safe, productive and environmentally responsible manner for many years," said Leer. "We have a solid base of reserves at Skyline and expect the mine to resume production as a valuable and competitive operation at some point in the future."

Skyline has a reserve base of about 50 million tons of low sulfur coal.

Canyon Fuel operates two other underground longwall mines in Utah - Sufco in Sevier County and Dugout Canyon in Carbon County. Dugout employs approximately 155 workers and produces more than three million tons annually.

"We have been pumping water out of the Sufco mine for a very long time, so that is not anything new to us," explained Slone. "It just takes a lot of capital to open up new areas and this whole decision is market driven."

"We have not been able to sign any new commitments for the new reserve area," added the vice president.

Canyon Fuel markets the output of the three mines to regional utilities using coal to generate electricity as well as to a number of large industrial facilities in Utah, Nevada and California.

The company will attempt to find jobs for as many Skyline employees as possible, but open positions are limited. Affected workers will receive a competitive severance package.

Arch is the nation's second largest coal producer, with subsidiaries in Utah, West Virgina, Kentucky, Virgina, Wyoming and Colorado. The company provides fuel for approximately six percent of the electricity generated in the United States.

"As other coal reserves in the region are depleted, we expect the Skyline reserves to become increasingly strategic," pointed out Leer. "However, the mine could remain idle for a period of several years before resuming operation. The timing of its reopening will depend entirely on the market."